Machinery purchased for $ 60,000 by Tom Brady Co. in 2010 was originally estimated to have a life of 8 years with a salvage value of $ 4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2015, it is determined that the total estimated life should be 10 years with a salvage value of $ 4,500 at the end of that time. Assume straight-line depreciation. Prepare the entry to correct the prior year's depreciation, if necessaryPrepare the entry to record depreciation for 2015

No entry

Depreciation account is debited by $4,100

Explanation:

(a). Purchase value of machine = $60,000

Originally estimated life of machine = 8 years

Salvage value at the end of time = $4000

Annually depreciated value of machine = (Purchase value of machine -Salvage value of machine) ÷ Original estimated year

= ($60,000 - $4000) ÷ 8

=$56,000 ÷ 8 = $7,000 per year

Depreciation on the 5 year basis = $7000 × 5 = $35,000

Value of machine after 5 year = $60,000 - $35,000 = $25,000

Remaining life Depreciation =10 - 5 = 5 years

New depreciated amount value = Value of machine after 5 year - New salvage value

= $25,000 - $4,500

= $20,500

Annual Depreciation next 5 years= $20,500 ÷ 5 = $4,100 per year

No entry is needed because $4,100 per year will give salvage value of $4,500.

B) Entry to record the depreciation (2015)

Depreciation A/c Dr.   $4100

To Machinery A/c  $4100

( Being depreciation for 2015 is recorded)

Depreciation account is debited in the income and expenses account. Because it is a expenses.

Hence, Machinery value will come down in assets side of balance sheet.